Memorandum
City of
City
Manager’s Office
TO: David
L. Corliss, City Manager
FROM:
CC:
Charles Soules, Public Works
Director
Ed Mullins, Finance Director
Jonathan Douglass, Assistant
to the City Manager
DATE: November
1, 2007
RE: Local Sales Tax Options
Following Commission discussion of local sales tax
comparisons to other communities, staff reviewed state statutes and developed
options for Commission review.
State Law
Regarding Sales Tax Authority and Current Sales Tax Rates
As previously presented to the Commission, the City of
The city general purpose sales tax was instituted in 1971
while the second .5% was approved by voters and went into effect in 1990 and
funded hiring of public safety personnel and purchase of equipment. The 2008 budget included sales and use tax
revenues of $13.6 million.
The 1% county-wide sales tax was approved in 1994 and
became effective in 1995. When this tax
was enacted, the City indicated that it would dedicate 5 mills of its share of
the County sales tax receipts toward property tax reduction. This “5 mill property tax” amount stays in
the City’s general fund and grows as our assessed valuation grows. An annual 5% increase in assessed valuation
is included in projections. In addition
to the mill rate reduction, funds are transferred to support recreation operations
and the city’s share of the cost to operate the Lawrence-Douglas County
Community Health Facility on
As a result of the reduced mill levy, receipts for vehicle
property taxes are lower. County sales
tax funds are applied to replace those revenues. Remaining collections are used to achieve
fund balance goals.
The 2008 budget projects receipts totaling $9 million from
the county-wide sales tax, utilized as follows:
Property Tax Reduction $4.3 million
Recreation Operations 1.4 million
Health Facility Operations
180,000
Motor Vehicle Revenue Loss 120,000
Transfer to Sales Tax Reserve
3 million
Debt
service for prior capital projects ($1.5 million)
Street
maintenance projects ($850,000)
Sales Tax Options
Staff has prepared information on four scenarios for
Commission review as outlined below.
Each scenario provides funding for infrastructure maintenance, economic
development and open space acquisition. Projections assume that a 1% sales tax
generates $12 million annually and conservatively estimates 2% annual sales tax
growth.
Scenario 1: .25% sales tax with 5 year sunset
Total first year revenue: $3 million
Total estimated revenue – all years: $15.6 million
Infrastructure allocation: $2.5 million annually
Economic Development allocation: $250,000 annually
Open Space Acquisition allocation: $250,000 annually
Scenario 2: .25% sales tax with 10 year sunset
Total first year revenue: $3 million
Total estimated revenue – all years: $32.8 million
Infrastructure allocation: $2.5 million annually
Economic Development allocation: $250,000 annually
Open Space Acquisition allocation: $250,000 annually
Scenario 3: .50% sales tax with 5 year sunset
Total first year revenue: $6
million
Total estimated revenue – all years: $31.2 million
Infrastructure allocation: $5 million annually
Economic Development allocation: $500,000 annually
Open Space Acquisition allocation: $500,000 annually
Scenario 4: .50% sales tax with 10 year sunset
Total first year revenue: $6
million
Total estimated revenue – all years: $65.7 million
Infrastructure allocation: $5 million annually
Economic Development allocation: $500,000 annually
Open Space Acquisition allocation: $500,000 annually
Anticipated Impact on
Infrastructure
Currently, the primary pavement maintenance operations
include the mill and overlay program, which includes some curb and gutter
replacement, and the microsurfacing program. These preventative maintenance
methods are appropriate for full-depth asphalt pavement, as well as concrete
streets with an asphalt surface layer, that have not yet deteriorated beyond a
certain condition. The condition of the pavement on each street is indicated by
a pavement condition index (PCI) that ranges from 0 to 100. Streets are
considered too deteriorated for preventative maintenance when the PCI is below
55 for residential streets, 60 for collector streets and 65 for arterial
streets. Curb and gutter condition is rated separately as poor, fair or good.
Based on those criteria, an area equivalent to
approximately 250 miles of two-lane residential streets is eligible for
preventative maintenance programs over the next ten years. (Streets that are
three or four lanes are included in the total as an equivalent length of
two-lane roadway.) There are also 61.6 miles of curb and gutter in poor
condition. In addition to the asphalt surfacing, there are nearly 31 miles that
are brick or a combination of brick and other materials and 20 miles that are
concrete.
Of the 250 miles of surfacing, approximately 140 miles is
suitable for microsurfacing and the remaining 110 miles will need to be milled
and overlaid. At current contract funding levels (approximately $4.5 million)
the annual programs mill and overlay an equivalent of 8.6 miles, microsurface
an equivalent of 18.2 miles, and replace 8.9 miles of failed curb and gutter.
Maintenance programs for brick and concrete pavements are not currently in
place. Spot repairs of the worst areas are completed by the city’s Street
Division on a complaint basis.
With the potential of an additional $2.5 million per year
(scenario 2), over a 10 year period the annual programs could be increased to
microsurface approximately 27 miles, mill and overlay approximately 13.5 miles,
and replace 9 to 10 miles of curb and gutter each year. In that 10-year program
all of the candidate streets could be addressed and all poor curb and gutter
replaced. Toward the end of the period, streets which were milled and overlaid
in recent years and the first few years of an expanded program could also be
microsurfaced to provide a longer pavement life. The additional funding would
also allow the city to begin addressing portions of the brick and concrete
streets. The proposed programs for those pavements would include funding for
restoring a minimum amount of those pavements each year, such as one block of
brick pavement each year and 5,000 square yards of concrete.
An additional $5 million annually (scenario 4), would allow
the above to be accomplished and would add approximately $2.5 million each year
to begin reconstruction of streets which are in a condition beyond which preventive
maintenance will be effective (for example 19th Street and Kasold
north of 15th Street).
Process for Referenda
Should the Commission direct that a sales tax question be
placed on the ballot, a referendum may be held at any time. A referendum could be held in typical
election manner or mail ballot may be used.
Per state statute, direct expenses of a city referendum are charged back
to the city if an election is not held on the date of a countywide
election. Such an election is estimated
to cost approximately $36,000. Should an
election be scheduled at the same time as another election, little if any, additional
cost is charged to the city.
Mail ballot elections are authorized by state statute as
outlined in the attached memo
from Administrative Services Director/City Clerk
Staff has reviewed information from the Secretary of
State’s office which tracks mail ballot elections by jurisdiction, issue,
number of ballots mailed and number returned.
While there have been over 120 mail ballot elections within the State of
Action Requested
This is provided for Commission review and discussion. Due to the scope of projects which could be
completed with various funding levels, staff’s recommendation would be to
pursue scenario 4, a .50% sales tax for a period of 10 years.